Banks can return cheques that alter anything other than date

Source:Ravi Samalad:ML:May19,2010

If a recent Reserve Bank of India’s (RBI) circular is implemented, bank customers will have to be extra careful whenever they issue a cheque. If customers have made any correction like change of amount (numerically or in words), or the name on the cheque issued, then it would be returned by the clearing branch. The only correction that would be allowed is the date of the cheque. The circular is designed to prevent fraudulent cheque alterations.

“We are in the process of implementation of the circular issued by Reserve Bank of India. As this will have an impact on customers, we have already commenced the exercise of informing them about this change. This communication will continue throughout the first quarter of this financial year. Simultaneously, notices are also being put up in all the branches. This will come into effect from 1st July 2010, by which time adequate notice would have been given to all customers,” said S. Ramakrishnan, Head - Retail Liabilities Product Group,HDFC Bank.

In its circular dated 22 February 2010, RBI states, “No changes/corrections should be carried out on the cheques (other than for date validation purposes, if required). For any change in the payee’s name, courtesy amount (amount in figures) or legal amount (amount in words), etc., fresh cheque forms should be used by customers.” If there are any alterations on the cheque, except the date, customers will have to issue a fresh cheque. RBI believes that this would help banks to identify and control fraudulent alterations.

Chequebooks carry a standard tip wherein customers are requested to refrain from carrying out any alterations in amount and payee name. But usually banks clear cheques if there are any minor corrections. Currently banks clear a cheque if it is counter-signed by the issuer in case of any corrections.

“There is no rule as such. If one or two corrections are made and if it is countersigned then the cheque can be cleared,” said an official from a private bank.

“As of now we have not fixed any date for implementation of this circular. Somebody who is in a state of readiness can implement it. It is for the benefit of the customers,” said a top official from RBI.

“Frauds do not only happen because of cheque alterations. This is only one modus operandi. Some people change the cheque’s page name; remove account payee and amount etc. Some people also print fake cheques. This one circular is not going to reduce such fraud cases,” said Ramavatar Singh, general manager, Bank of India.